Chinese fiscal revenue growth is set to hit its lowest level in more than three decades this year, Deutsche Bank warned, which is likely to add more downward pressure on a slowing economy.
“We forecast the growth of total government revenue will slow to 1 percent in 2015 from 4 percent in 2014 and 19 percent on average from 2009 to 2013,” the bank said in a recent report, stating that 2015’s pace of growth will be the slowest since 1981. It also predicts growth of local government revenue will drop to -2 percent this year from 2 percent in 2014.
“We believe this is the most important risk to the economy and one that is not well recognized in the market,” the bank added.
The slump in land sales, which make up 23 percent of national government revenue, is to blame for the fiscal crisis, according to the report. Land auctions plunged 55 percent in the third-quarter and averaged a decline of 40 percent across 300 cities all of last year, according to Deutsche Bank
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